One Page Annotated WSJ Summary: Friday Sept. 22

Sep. 22, 2006 7:29 AM ET

by: SA Editors

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Summary: Three macro data points: (1) The Philadelphia Fed published its index of business conditions in the Mid-Atlantic states, which is strongly correlated with industrial output, at noon yesterday. The results were surprisingly poor: the index fell to negative 0.4 in September (implying contraction) versus positive 18.5 in August. This is the first negative reading since April 2003 and below economists' expectations of 15. The DJIA immediately fell 50 points -- see the chart for the Diamonds ETF (NYSEARCA:DIA). (2) The Conference Board's index of leading indicators showed a decline of 0.2% in August, the same decline as July and the fifth decline in the last eight months. (3) The Labor Department reported that initial jobs claims rose a seasonally adjusted 7,000 to 318,000; the 4-week moving average was unchanged at 315,000. Full WSJ article >Related links: The Philadelphia Fed's press release and data • The Conference Board's full press release in PDF • Wider context: Fed Pauses Again, Rate Cut on the Horizon? • Wednesday's Fed Release: Where's The Analysis of the Economy?! • Trading: What a U.S. Recession Would Mean for Sectors, Foreign Stocks -- discusses potential impact on the iShares Materials ETF (NYSEARCA:IYM).

Summary: The current slide in oil prices has OPEC ministers bickering over if and when to cut output in an effort to shore up tumbling prices -- and who should bear the pain of doing so. Supply cutbacks had originally been slated for early next year, but if prices continue to slide, OPEC could be forced to take immediate action. Points of contention: 1) What price to defend -- some ministers say $55/barrel; others say it depends on the speed of the drop. 2) Who cuts first, and how much each nations cuts -- no one likes to lose market share, and it is a question of how much pain they can bear before they are forced to settle their differences. The kingpin in the equation is Saudi Arabia, and its oil minister Ali Naimi. The kingdom accounts for close to 30% of OPEC output, making Naimi the cartel's de facto leader. On Tuesday, with prices around $61, Naimi offered a clue as to his stance, telling reporters, "The oil industry is convinced that this price is reasonable." WSJ bottom line:"Saudi Arabia has let its output fall this year in line with demand for its oil. But OPEC officials acknowledge that there is a limit to how much the Saudis will cut supply unilaterally. When the kingdom reaches its pain threshold, OPEC officials say, Mr. Naimi will insist others also reduce output. That is likely to be when the fighting erupts in earnest."Full WSJ article >Related links: Bulls Versus Bears on the Oil Outlook • As Oil Prices Slide the Pundits are Playing it Slick • OPEC Ministers Trying to Gauge How Far Oil Can Slip • Related ETFs: Oil Service HOLDRs ETF (NYSEARCA:OIH) invests in oil-service companies such as drillers and well-site managers. United States Oil Fund ETF (NYSEARCA:USO) invests in crude oil futures, gasoline, and other petroleum-based fuels.

Summary: General Motors (NYSE:GM) remains skeptical of the merits of a proposed three-way alliance with Renault and Nissan (OTCPK:NSANY), an alliance that is to be discussed next week by GM CEO Rick Wagoner and Renault and Nissan head Carlos Ghosn. Mr. Wagoner is under pressure from investor Kirk Kerkorian, who holds a 9.9% stake in the company and is aggressively pushing for the alliance. Mr. Ghosn and his team favor the proposal because of its potential to save costs and create value, while Mr. Wagoner's team would rather give its turnaround strategy time to show results. Mr. Ghosn hopes for, "a comprehensive alliance, including shared equity stakes, or none at all" -- an approach unlikely to tally with Mr. Wagoner's preference for limited cooperation on a narrow scale. Full WSJ article >Related links:Message to GM Investors: Whoa! • Going, Going, Ghosn? GM-Nissan-Renault Merger Seeming Increasingly Unlikely • GM Slowing SUV Production; Wagoner Comments on Nissan-Renault

Summary: While HP (NYSE:HPQ) CEO Mark Hurd is acknowledged as the catalyst behind HP’s recent resurgence, investors are becoming concerned that he had more knowledge of HP’s internal leak investigation than previously thought. This concern helped drive down HP shares by 5% yesterday. Although the leak investigation started before Hurd joined HP, a January 2006 email was discovered (written by an HP PR manager) stating he recommended the investigation of five directors. The question is: When did Hurd become aware of the investigations, and did he know (or approve) of the tactics that were employed to gather evidence? Mr. Hurd is scheduled to address these issues today (at HP headquarters), and will join the group of HP executives previously scheduled to face questioning by the House Energy and Commerce Committee. Aside from dealing with the investigation, management experts agree that Hurd’s main focus has to be to convince investors, employees and customers that the scandal will have minimal impact HP’s day to day business. Full WSJ article >Related links: Previous WSJ summaries on the scandal (dating back to September 6th.) • The Wall Street Journal: Tracking the H-P Controversy • Conference call transcripts: Hewlett-Packard Q3 2006